Strategy Switching in the Japanese Stock Market


Yamamoto, Ryuichi, and Hideaki Hirata. 2013. “Strategy Switching in the Japanese Stock Market.” Journal of Economic Dynamics and Control 37 (10): 2010–2022.


This paper investigates the expectation formation process of Japanese stock market professionals. By utilizing a monthly forecast survey dataset on the TOPIX distributed by QUICK Corporation, we sort forecasters into buy-side and sell-side professionals. We empirically demonstrate that the buy-side and sell-side professionals use either fundamental or trend-following strategies throughout their expectation formation processes and that they switch between fundamental and trend-following strategies over time. We also discuss that strategy switching can be key in understanding the persistent deviation of the TOPIX from the fundamentals.